(Reuters) - A scramble by Japanese investors for safe havens after a deadly earthquake has pushed physical gold premiums to three-year highs as buyers in less affected parts of the nation stretched supply, unleashing a trend that could give a lift to world prices.
Buying of the precious metal by investors and households in the west of Japan, combined with transport woes in the world's third largest economy, usually a net gold exporter, could dry up supplies elsewhere in Asia, and inevitably push up world prices.
Investors in Japan dived into yen-denominated markets such as TOCOM gold after concerted intervention by the G7 group of nations weakened the currency against the dollar last Friday, a day after the yen rose to a record high of 76.25.
"If the dollar/yen stabilizes and a clear trend emerges that the dollar has hit a bottom against the yen, then that may spur gold buying from households looking to get bullion cheaply," said Koichiro Kamei of financial research firm Market Strategy Institute, adding that the G7 action could also lift the international gold market.
Any hoarding or buying of the precious metal by Japan's investors, who sold 50 tonnes of bullion back to dealers last year, could provide a spark to touch off global prices.
But the appetite for gold revived by Japan's devastating 9.0-magnitude quake and the ensuing tsunami, estimated to have killed more than 10,000 people, could hurt supplies across Asia, by cutting into the country's exports of gold, which stood at 78 tonnes in 2010.
"A slowdown in Japanese exports due to hoarding and transport problems could also put pressure on physical supply in the rest of Asia," Mark Pervan, head of commodities research at ANZ, told Reuters.
"This is a buy on the dip opportunity and investors, not just Japan, but globally, have been looking for a trigger to get back into the market. The bounce in TOCOM and rising premiums in Japan could be it."
TOCOM gold futures significantly underperformed in the four days immediately after the March 11 quake as investors sold gold to cover margin calls in equities, which slumped almost 20 percent.
But both markets have since partially recovered, with TOCOM gold up 4.4 percent on the day on Friday, trading above 3,720 yen an ounce, but 1 percent down on the week, having dropped by as much as 6.8 percent since the earthquake.
Spot gold hit a record high of $1,444.40 an ounce on March 7, and was trading above $1,425 on Monday. Premiums for gold bars in Japan rose to $2 an ounce late last week, from zero before the earthquake.
LOGISTICS
Logistics problems have added to tightness in the physical market, with bullion houses unable to get extra supply from other centers in Asia such as Hong Kong and Singapore.
"We have difficulty with transportation in parts of the country," said a dealer at a bullion trading house in Tokyo. "Even if people want to go to bullion shops, they can't. The more important question is whether we can survive or not, although we believe the situation will improve."
Japan's largest bullion trading house, Tanaka Kikinzoku Kogyo, said the earthquake had forced it to close some of its outlets and change business hours in others, but operations had largely recovered. "However, various infrastructure, such as highways and railroads are still cut off, resulting in part of material procurements and shipments not proceeding as scheduled," it said on its website. Supply tightness in Japan could also spill into Hong Kong and Singapore, where sales of scrap remain slow, despite a rebound in gold prices to above $1,400 an ounce.
"Premiums on physical gold are rising as domestic stocks have been low after Japanese households had been selling their holdings late last month and early this month when prices were rising," said Akira Doi, vice-president at bullion house Daiichi Commodities Co.
"What we are seeing right now ismixed. In the west of Japan, households' buying of gold has generally picked up after the quake."
But in Tokyo, on the east of Honshu island, millions of people remained indoors, fearing a blast of radioactive material from Fukushima Daiichi complex 240 km (150 miles) to the north.
RUSH TO BUY GOLD?
"It's possible theoretically that dealers are trying to procure gold in anticipation for demand by retail investors for safe-haven buying in the future," Kamei of Market Strategy Institute said.
"For now, they are taking a wait-and-see stance."
In 2010, Japan's retail investors sold a net 50 tonnes of gold bars and coins. This compares to a 34 percent jump in gold bar and coin investment worldwide, to 995 tonnes, according to the provisional data by the World Gold Council.
The country was a net exporter of a record 78 tonnes of gold, equivalent to around one fifth of top miner China's output, making resource-poor Japan as significant a supplier to the market as Mexico is from its mines.
Exports had already been expected to slow, with households cutting back on gold sales in hopes of higher prices.
"There may be some distress selling of gold by people in need, but it won't be large-scale. This is likely to make people more reluctant to sell whatever gold they have, even if prices do rise," said a trader in Australia.
(Source: http://www.reuters.com/article/2011/03/21/us-gold-japan-idUSTRE72K1BJ20110321?pageNumber=2)
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